Portfolio activity unit 2

25.11.2021

Managerial Accounting

BUS5110

Professor: Dr. Victor Lee

A picture of a business's financial health, its performance, operations, and cash flow are called
financial statements. The Financial statements show a company's revenue, expenses,
profitability, and debt. The investors use the information in the financial statement for the future
decision making. There are other stakeholders as well that are concerned with financial statement
details, they are the government and department of tax in the government. They look to the
financial statement to confirm if they are aligned with rules and laws of the country. However, it
might be different for tax requirements country to country for different activities and
transactions.

Besides the investors and government there are other users such as suppliers, customers and the
public that have interest to financial statements according to Kaplan Financial Knowledge Bank
(n.d.) the followings are the other users of financial statements;

Suppliers:

Suppliers need to know if they will be paid. New suppliers may also require reassurance about
the financial health of a business before agreeing to supply goods.

Customers:

Customers need to know that a company can continue to supply them into the future. This is
especially true if the customer is dependent on a company for specialized supplies.

The public:
The public may wish to assess the effect of the company on the economy, local environment and
local community. Companies may contribute to their local economy and community through
providing employment and business for local suppliers. Some companies also run corporate
responsibility programmes through which they support the environment, economy and
community by, for example, supporting recycling schemes.

The competitors also can be the users of the financial statements so that they can analyze and
make decisions.

In the reading assignment we have studied about cost accounting and I learned about the benefits
and limitations of the different methods. The proposed estimate of a product (costing) depends
on the type of products a business produces and the amount of effort that goes into analyzing the
costs associated with the unit product, the process and activity. There are three cost accounting
methods; job order costing, process costing, and activity-based costing. Each method has its own
benefits and disadvantages which cannot be fulfilled or used to achieve the same objective for
different businesses or products.

In the discussion assignment we discussed the three cost components which are director material
costs, labor costs and overhead costs. To predict what will happen to profit in the future, we must
understand how costs behave. To identify if the account’s total cost will change or remain the
same, are classified as variable, fixed, and mixed.

Through the units’ assignments I have learnt the details of profit business cost accounting as I
did not have experience of it because there are very few companies inside the country as my
country has been in severe conflict in the past 40 – 50 years. Recently the government was taken
over by an extremist group called Taliban. Also, because I myself have been working with non-
for-profit organizations for a long time. 

Reference:
Kaplan Financial Knowledge Bank (n.d.) Users of the Financial Statement

https://kfknowledgebank.kaplan.co.uk/users-of-the-financial-statements-

Walther, L. M. & Skousen, C.J. (2009). Managerial and Cost

Accounting. https://library.ku.ac.ke/wp-
content/downloads/2011/08/Bookboon/Accounting/managerial-and-cost-accounting.pdf